5 reasons to ignore Apple’s rare revenue dip | Cult of Mac

5 reasons to ignore Apple’s rare revenue dip


Apple logo overlayed in front of a stormy sky with sun breaking through the clouds, and the text,
Despite a 3% year-to-year drop in quarterly revenue (to "only" $94.8 billion), Apple delivers plenty of reasons for optimism.
Photos: Michael & Diane Weidner and Sumudu Mohottige/Unsplash License/Modified by Cult of Mac

Perhaps the best phrase to describe the results of Apple’s most recent financial quarter is, “It could have been worse.” Total revenue dropped 3% as the company battled inflation and other macroeconomic problems not of its making.

Still, Apple’s quarterly numbers beat the overly pessimistic Wall Street estimates. And there is more good news buried in the results Apple reported Thursday (and in the company’s earnings call with investors). Read on for five reasons to be optimistic about Apple’s future.

1. iPhone sales set March-quarter revenue record

While services revenue and fast-growing emerging markets were bright spots on the call, iPhone sales set a record for the quarter, too. Revenue hit a staggering $51.3 billion, up 2% year-over-year.

“The iPhone 14 and 14 Plus continue to delight users with their long-lasting battery and advanced camera, and our Pro users continue to rave about the most powerful camera system ever in an iPhone,” CEO Tim Cook enthused.

Luca Maestri, Apple’s chief financial officer, noted that while product revenue went down 5% from last year’s March quarter, iPhone sales stood out as a bright spot.

“There is a much broader revenue record thanks to a very strong performance in emerging markets from South Asia and India to Latin America and the Middle East,” he said.

He also cited extraordinarily high customer satisfaction as a factor in iPhone’s success.

“Our active install base of iPhone grew to a new all-time high and was up in all our geographic segments,” Maestri said. “We’re very pleased by the results of the latest survey of U.S. consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family.”

Yet another reason for strong iPhone sales came up during the call when an analyst asked if December shutdowns may have deferred iPhone purchases for some folks.

“It’s hard to quantify this, but we do believe we did recapture some amount of sales in the March quarter,” Cook said. “As we did see the iPhone performance accelerate relative to the December quarter.” — David Snow

2. Apple services set all-time revenue record

A major highlight of the call was the news that Apple’s services division set an all-time record for the March quarter, with $20.9 billion in revenue and a new high in terms of the number of paid subscriptions across services.

“With more than 975 million paid subscriptions, we’re reaching even more people with our lineup of services,” Cook said.

For his part, Maestri noted that paid subscriptions went up 150 million during the past 12 months and arrived at “nearly double the number of paid subscriptions we had only three years ago.”

Cook pointed out high revenue set all-time records across App Store, Apple Music, iCloud and payment services.

As usual on these calls, he showed great enthusiasm for Apple TV+, but he also mentioned the quarter saw the launch of new services — namely, the Apple Music Classical app, plus financial services including Apple Pay Later (which lets users split purchases into multiple payments free of interest or fees) and new high-yield Apple Card Savings accounts (which are proving wildly popular).

Maestri also highlighted March-quarter records for advertising, Apple Care and video services. But not all services are in great shape.

“Despite these records, as we saw in recent quarters, certain services offerings, such as digital advertising and mobile gaming, continue to be affected by the current macroeconomic environment,” he said.

However, he cited the robust subscription growth, the growing install base of more than 2 billion active devices and increased customer engagement with services evidenced by double-digit growth as reasons for optimism going forward. — David Snow

3. Supply chain problems look like a thing of the past

After several years of supply chain chaos sparked by the COVID-19 pandemic, things appear to be getting back to normal.

“Despite this, this ‘parade of horribles,’ if you will — between the pandemic and the chip shortages and macroeconomic kind of factors — the supply chain has been incredibly resilient,” Cook said.

For example, he said iPhone 14 Pro and iPhone 14 Pro Max did well — “up until the point where we had a supply shortage” due to COVID-19 restrictions in Chinese factories that produce the devices. Cook said Apple is “happy to now be at a point where we’re shipping to the demand.” — Lewis Wallace

4. Yes, Apple does AI

With advances in artificial intelligence making headlines every day — and ChatGPT making Siri seem stupider all the time — Cook said Apple thinks AI is “huge.” He also stressed that Cupertino is taking its usual cautious approach to this buzzy technology.

“I do think it’s very important to be deliberate and thoughtful in how you approach these things,” he said. “And there’s a number of issues that need to be sorted, as is being talked about in a number of different places. But the potential is certainly very interesting.”

He also pointed out that Apple already successfully incorporates AI into many of its products — notably iPhone and Apple Watch — and has done so for years.

“We’ve obviously made enormous progress integrating AI and machine learning throughout our ecosystem,” he said. “You can see that in things like fall detection and crash detection and ECG. These things are not only great features, they’re saving people’s lives.” — Lewis Wallace

5. Apple is relatively positive about the June quarter

Continuing the “it could be worse” theme, while Apple isn’t predicting a turnaround in the near future, neither is it expecting its financial results to decline in the April-through-June months.

“We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we have projected today for the current quarter,” said Maestri.

But he also warned that product launches can boost revenue in one quarter but then make the same quarter of the following year look weak if there isn’t a follow-up launch. That’s Maestri warning analysts not to get more optimistic about the current quarter than is justified.

“Keep in mind, as you know we always have differences in the launch timing across our products,” said Apple’s CFO. “In the June quarter a year ago, we had the full quarter impact of the launch for both the iPhone SE and the iPad Air, which leads to a more difficult compare.”

Wall Street seems to reacting positively to his prediction. The AAPL share price shot up more than 2% in after-hours trading. — Ed Hardy


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